In Yelp Earnings, No Sign of the ‘Mobile Gap’

Yelp posted stronger-than-expected earnings on Thursday, sending shares up nearly 10% in after hours trading — a fitting coda to a banner year for the firm on Wall Street. Shares of Yelp more than tripled in 2013, driven in part by rapid international expansion, a burgeoning local ad market in the U.S., and well-received strategic initiatives.

The reviews company reported quarterly revenue of $70.7 million in the fourth quarter, on a $2.1 million loss. Yearly revenue grew to $233 million in 2013, up 69% from a year earlier, due in part to solid growth in the number of active advertisers in the United States and a smooth transition from desktop to mobile.

Making the most out of mobile
During a conference call on Wednesday, Jeremy Stoppelman, the company’s chief executive, told investors that the “majority of searches,” and 42% of ad impressions, are now coming from its mobile site and application. Thanks to an early decision to bundle mobile and desktop inventory, the company has been able to avoid a dip in revenue caused by a shift in usage from desktop to mobile, where impressions tend to garner less value than desktop.

The company also began to roll out functionality in the fall that allows users to submit reviews from mobile devices — which the company’s leadership has been wary of due to quality control concerns. In the fourth quarter, users submitted 1.1 million reviews from mobile devices, accounting for nearly one of every three new reviews in the quarter.

Lots of interest in Yelp Platform
The bulk of the earnings call Thursday centered around Yelp Platform, the six-month old partnership initiative aimed at helping the reviews site integrate food delivery and other commerce-related tools into its system. Analysts peppered the company’s leadership on its potential as a revenue generator, but the company remained mum on potential revenue-sharing opportunities, stressing instead that the initiative would remain focused on user experience and data.

“Our focus [with Yelp Platform] starts with the consumer,” said Stoppelman. “Sure, there’s a lot of great data, which we can generate and pass on to business owners. But I don’t think it will start impacting our ad sales anytime soon. We’re seeing really nice growth with the partners we’ve got, and we have a good set of partners which we’ll be rolling out over the course of the year.”

The company has rolled out integrations with food ordering firms, Eat24 and Delivery.com, and has announced partnerships with software providers in other verticals like Booker and Demandforce, allowing users to order food or book appointments directly from the Yelp site or app. Usage remains limited, with the company seeing a little over ten thousand orders per week.

Stoppelman said that the company plans to work on automating the onboarding process, allowing the company to integrate a host of smaller local software providers into the program.

There’s a long-term revenue play here, but the short term strategy is mostly defensive. If executed successfully, the initiative may help defend the company’s core search and discovery business against vertically-focused local commerce startups such as Uber and ZocDoc.

But competition also appears to be coming from elsewhere.

Earlier today, a spokesperson for Facebook confirmed that the social network is testing a mobile version of Graph Search, its social discovery product that could compete with Yelp. The news comes as Facebook continues to dance around the local space, testing potentially relevant features (like a more advanced star ratings system) while remaining relatively quiet about a more extensive strategy to enter the local market.